From Governance to Growth: Exploring Political Systems’ Impact on Economic Competitiveness

Natália Teixeira （ ISG - Business & Economics School ）

https://doi.org/10.37155/2972-4813-gep0301-1

Abstract

Political systems profoundly influence the economic growth and competitiveness of nations. This review article synthesizes recent scholarly research to explore how political stability, institutional quality, and public policy formulation interact to shape economic outcomes. Political stability reduces uncertainty, bolsters investor confidence, and attracts foreign direct investment, thereby enhancing economic resilience and global competitiveness. In contrast, political instability leads to reduced innovation, weakened institutional efficiency, and capital flight, undermining long-term growth prospects. Institutional quality emerges as a cornerstone for sustainable development, fostering transparency, accountability, and governance efficiency. Countries with robust institutions benefit from greater sectoral diversification, higher levels of innovation, and a conducive environment for evidence-based policymaking. The role of public policy formulation is equally critical, as collaborative, and transparent policy making fosters innovation and enables the coordination of public and private initiatives, essential for navigating complex global economic challenges. The article also highlights the limitations of authoritarian systems, which, while capable of short-term growth, often falter due to corruption and inefficiencies. In contrast, inclusive and participatory governance structures contribute to higher levels of trust, predictability, and policy alignment with market dynamics. By connecting these dimensions, this article provides a cohesive framework that underscores the interplay between governance structures and economic growth, offering actionable insights for policymakers and scholars. The findings emphasize the importance of stable political environments, resilient institutions, and transparent policy frameworks in ensuring sustainable economic advancement. Future research directions include exploring the implications of digital governance and geopolitical shifts on political systems and their economic ramifications.

Keywords

Political Stability; Institutional Quality; Public Policy; Economic Growth; Competitiveness; Governance; Transparency

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Copyright © 2025 Natália Teixeira Publishing time:2025-03-30
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